Oil rose to the highest level in almost four months as service began on the expanded Seaway pipeline and heating oil jumped.
Futures advanced 0.6 percent after Seaway resumed service to the Gulf Coast from Cushing, Oklahoma, on Jan. 11. The line’s increased capacity of 400,000 barrels a day may help ease a glut at Cushing that has held down prices of West Texas Intermediate crude. Heating oil climbed the most in nearly two months on forecasts for cold weather in the East Coast and Midwest.
“Seaway is giving oil a boost,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “We are going to have some very cold weather and it’s increasing demand expectations for heating oil.”
WTI oil for February delivery increased 58 cents to $94.14 a barrel on the New York Mercantile Exchange, the highest settlement since Sept. 18. Prices have jumped 2.5 percent this month. Prices accelerated gains in the last 15 minutes of floor trading as U.S. equities pared losses. Trading volume was 12 percent above the 100-day average.
Brent for February settlement rose $1.24, or 1.1 percent, to end the session at $111.88 a barrel on the London-based ICE Futures Europe exchange. Volume was 5.5 percent more than the 100-day average.
The European benchmark contract was at a premium of $17.74 to WTI. It settled at $17.08 on Jan. 11, the narrowest gap based on closing prices since Sept. 19.
The 500-mile (805-kilometer) Seaway pipeline resumed full service after shutting Jan. 2 to complete the final connections necessary to boost the line’s capacity by 250,000 barrels from 150,000, Enterprise Products Partners LP and Enbridge Inc. said on Jan. 11.
Seaway’s expansion may reduce record inventories of crude at Cushing, the delivery point for U.S. benchmark WTI oil futures. Cushing stockpiles climbed to 50.1 million barrels in the week ended Jan. 4, the highest level in data going back to 2004 from the Energy Information Administration, the Energy Department’s statistical arm.
“This is another milestone on the road to eventually relieving the structural oversupply situation in the U.S. Midcontinent,” said Mike Wittner, the New York-based head of commodities research at Societe Generale SA, in a note to clients today.
WTI slid in 2012 as the U.S. shale boom deepened a glut at Cushing, America’s biggest storage hub and the delivery point for the New York contract. That left it at an average $17.48 a barrel below Brent last year, versus a premium of about 95 cents in the 10 years through 2010.
Seaway “should give WTI a boost,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors.